Related party deals fraction of turnover: IndiGo co-founder Rahul Bhatia

Bhatia's InterGlobe Enterprises said that the related party transactions have been executed on an arms’ length basis and in the ordinary course of business.

Published: 11th July 2019 11:22 AM  |   Last Updated: 11th July 2019 11:22 AM   |  A+A-

Indigo

File Image of an Indigo Aircraft for representational purposes. | Reuters

By Express News Service

NEW DELHI:  IndiGo co-founder Rahul Bhatia’s InterGlobe Enterprises (IGE) on Wednesday responded to allegations made by co-promoter Rakesh Gangwal regarding related party transactions (RPT) at IndiGo’s operating firm: InterGlobe Aviation (IGAL). IGE said that the RPTs accounted for just 0.53 per cent of the company’s turnover and that all “RPTs have been executed on an arms’ length basis and in the ordinary course of business”. 

Earlier in the day, the company’s stock crashed over 11 per cent on the bourses after the Securities and Exchanges Board of India (SEBI) sought its response on Gangwal’s allegations. Gangwal had claimed that serious corporate governance lapses have taken place in IGAL, including questionable RPTs, non-appointment of a woman director, and other issues regarding its Articles of Association (AoA) and the appointment of senior personnel like the company’s chairman.

ALSO READ| Issues between promoters have nothing to do with airline functioning: IndiGo CEO

As far as the RPT’s are concerned, IGE said that as on date, RPTs exist only in four areas. All four of these together accounted for just Rs 150.12 crore or 0.53 per cent of IGAL’s consolidated turnover, it said citing unaudited numbers for FY19. 

Meanwhile, Gangwal had also raised issues surrounding the AoA, which he said gave IGE and Bhatia sweeping rights over key appointments. For instance, the AoA agreed to by the promoters, allows IGE to nominate a chairman. This, Gangwal said, compromises the post’s independence. Gangwal and his affiliates hold around 37 per cent stake in IGAL, while Bhatia and his affiliates (IGE Group) hold around 38 per cent. 

Bhatia, in his letter to Board of Directors, had countered that Gangwal had been clear during a meeting with IGE Group’s lawyers that he had made a mistake in agreeing to support IGE’s voting rights embedded in the Shareholders’ Agreement and the AoA, and that his desire was to have all those provisions deleted.

“To me, this does not appear to be a governance issue, given the fact that the RPTs mentioned is less than one per cent of the company’s revenue. AoAmay be skewed towards one group and the other might be trying to get that corrected,” said an analyst. Experts are uncertain what the regulator can do regarding the AoA and shareholders’ agreement. The markets are, however, concerned on how the issue could play out, with analysts saying that if the feud is not settled and heads for arbitration, it could result in significant erosion in market capitalisation

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp